OECD predicts slower Czech growth, urges more fiscal reform

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The Czech Republic’s booming economy is to grow slower in coming years and will be in need of further fiscal reform, according to a survey by the Organization for Economic Cooperation and Development (OECD) released Thursday.

Organization for Economic Cooperation and Development predicts that the Czech economy is to slow down to 4.5% in 2008 and 5% in 2009, still well above the Western European average but below the 6.5% levels of recent years, OECD general secretary Angel Gurria said. The CzechRepublic is one of the most successful post-communist economies that has been fuelled by car and electronics export industries.

According to the survey, the country could reach Western European levels of prosperity in 10 years if it keeps up its growth. “Assuming real GDP-per capita growth of 2% in the euro area and 5% in the Czech Republic, the gap could close within a decade,” OECD said.

The Czech Republic’s gross domestic product per person is currently about 75% of the eurozone average on a purchasing- power-parity (PPP) basis, the survey said. OECD’s Gurria praised the centre-right cabinet for setting out on a budget-tightening course, but also urged further fiscal reform that would sustain country’s competitiveness in the face of population ageing. “You are a small, open economy. You have to always keep in great shape,” he said.

The OECD recommended that the Czech Republic increase retirement age, keep overhauling healthcare and improving conditions in the labor market. The call for further fiscal reform came a day after the country’s top court abolished one of the government’s earlier measures aimed at taming public finances. The government hopes to introduce further budget-tightening reforms, but faces hurdles from its own dissidents and leftist opposition in a tightly divided parliament. (m&c.com)

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